Does conventional wisdom make economic sense? In many cases, it doesn't. This blog will question the economic efficiency and market viability of popular "solutions" to today's problems. Copyright 2011.

Thursday, February 5, 2009

The Free Market Strikes Yet Again!

What started off to be a piece gently mocking the heavily subsidized alternative energy disciples has actually left me somewhat humbled.

In an article from the "New York Times" titled "Dark Days for Green Energy," there was much wailing, moaning and gnashing of teeth around wind, solar and geothermal suffering from the credit crisis. Smugly, I was going to point that in peoples' faces and remind them that cheap and plentiful coal, as well as clean, renewable nuclear power were the way to go.

However, when I started looking into the big 3 solar stocks, SunPower (SPWRA), Suntech Power Holdings (STP), and First Solar (FSLR), I found something quite surprising. They are all pretty decent stocks that are doing well. While they are below there 52 week high, it seems the solar market is actually hanging in there, despite what the New York Times says. Surprised, aren't you? I didn't think so.

It turns out that these companies are locked into some pretty sweet deals with major power companies to install solar plants and that is driving the share price. While we can successfully argue the merits of solar, you can't argue that the stocks have done well. So yes, I made a snap judgement that was wrong.

However, about this I am right, neither solar, nor wind are currently profitable in the free and open market and require tremendous subsidies, that is, American tax payers are making up the difference. Further, wind and solar don't produce reliable power like coal, natural gas, or nuclear.

In short, I was taken in by the New York Times. What I thought was going to be an article bemoaning the crumbling of the alternative energy market actually turned out to be desperate plea to increase "green" funding in the stimulus bill. How could I have been some dumb?

***I am not a licensed financial adviser/planner/etc. This article doesn't constitute financial advice. If you buy the stocks listed in this article, you are on your own. You have been warned.***